The Advance of India... Can It Catch Up to China as a 'G2'?

India Surpasses Former Colonial Ruler UK's Economic Scale
Aiming to Become an Economic Powerhouse Like the 'Second China'
World's Factory VS World's Back Office

[Image source=Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyun-jung] India has surpassed its former colonial ruler, the United Kingdom, to become the world's 5th largest economy by Gross Domestic Product (GDP), drawing global attention due to its rapid population and economic growth. Despite a slowdown in global growth rates caused by inflation and the aftermath of COVID-19, India continues to achieve remarkable growth, raising expectations that it could become the 'Second China.'

However, within China, there is a pessimistic view of such prospects. The state-run English-language newspaper Global Times (GT) recently analyzed various figures and poured cold water on the 'Second China' outlook for India. One of the reasons cited for the current nearly sixfold gap between the two economies, which were at similar levels until the 1990s, is China's centralized administrative system, which holds an advantage over India's political instability.

◆ Similar Starting Points, but China Says "We Are Different" = The starting points of economic growth for China and India were similar in terms of timing and scale. India gained independence from the UK in 1947, and two years later, in 1949, the People's Republic of China was established. However, in terms of reform and opening up, China (1978) was earlier than India (1991), and its unique socialism that concentrated capabilities accelerated economic growth, according to Global Times.

The media explained, "Through reform and opening up, China escaped from being a low-income country and its GDP soared," adding, "In the 2000s, China successively surpassed Italy, France, and the UK, then overtook Germany in 2007 to become the world's 3rd largest economy, and by 2010, it became the world's 2nd largest economy by nominal GDP." It also compared growth rates, stating, "Between 1990 and 2021, China maintained an average annual growth rate of over 9%, while India only achieved 5.9% during the same period."

Above all, the media mentioned the functional differences between China as the 'world's factory' and India as the 'world's back office.' It acknowledged that "both countries benefited from globalization but chose different growth models in manufacturing and services," noting that China laid the foundation for economic growth by providing various incentives centered on the IT industry. The media added, "The share of software exports in India's total export revenue surged from 4.9% in 1997 to 20% in 2003-2004."

However, the media emphasized India's relatively unstable political situation and the resulting difficulty for the central government to implement strategies in a timely manner, highlighting the advantages of China's top-down administrative system.

[Image source=Yonhap News]

◆ China's 'Demographic Dividend' Nurtured... GT Says "India Won't Be Able to Utilize It" = The world is paying close attention to the effects of India's unstoppable population growth on its economy, but Global Times offered a pessimistic analysis on this as well. According to the statistics office, as of last year, the population difference between India (1.417 billion) and China (1.426 billion) has narrowed significantly, and China, experiencing low birth rates, is expected to cede its position as the 'world's most populous country' to India. The UN released its World Population Prospects in July, forecasting that India's population will increase by 273 million between 2022 and 2050, surpassing China next year.

'Population' has long been considered a major driver of economic growth for both China and India. The so-called 'Demographic Dividend' occurs when the proportion of the working-age population increases, lowering the dependency ratio and accelerating economic growth. According to the UN, the demographic dividend accounted for 15% of China's economic growth between 1982 and 2000. Qian Feng, research director at Tsinghua University's National Strategy Institute, observed that India has now entered this opportunity, which could last until the early 2060s.

However, the media pointed out, "Due to India's uneven social security, insufficient educational resources, and healthcare issues, it is questionable whether India can fully utilize the demographic dividend," adding, "These problems pose serious constraints on realizing the demographic dividend." It also cited India's severe polarization, stating, "The top 10% of Indians own 57% of the nation's wealth, while the bottom 50% hold 13%," labeling India as a "poor and highly unequal country." Furthermore, it noted India's low labor productivity, citing a 2018 PwC survey that "only 2.3% of India's workforce receives regular technical training."

Researcher Qian emphasized, "While China recorded GDP growth rates above 10% for several years, India has rarely achieved 8% growth for two consecutive years," and stressed, "India is unlikely to emerge as the third-largest economic power after China until it resolves internal issues such as controversial land ownership, political instability, and an unfair and opaque business environment."

This content was produced with the assistance of AI translation services.